Most financial experts say it’s a bad idea to get a refund year after year if there’s no change in your tax situation. Read the following articles on why a getting a refund isn’t the best financial move.
“The government doesn’t pay you a cent of interest while it’s holding your money hostage,” writes Wendy Connick for the Motley Fool.
“Getting a big tax refund each year isn’t necessarily a good thing,” writes Constance Brinkley-Badgett in a blog post for Credit.com. “It means you haven’t been putting that money to work for you all year long.”
But I concede that no matter how much we preach that getting a refund isn’t great, it’s not totally bad either.
You wouldn’t have earned much interest anyway. Savings rates are so pitiful that you aren’t losing much money by lending the government your money. Of course if you had invested the money in the stock market when it was riding high, the potential earnings were a good bit better.
It can force you to save. A survey this year by Bankrate.com found that many people plan to use their refund to build an emergency fund or pay down debt. Twenty-seven percent of Americans said they will get rid of some debt and 34 percent said they plan to save or invest their refund.
Bankrate.com has a great graphic that shows how adjusting your withholdings to increase your take-home pay by $50 per biweekly check could net more than $105,000 for your retirement.